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January 29, 2010
Broadband for all, or bigger government?

While the FCC considers whether to impose nondiscrimination and transparency regulation to all forms of broadband Internet access, Public Knowledge is proposing to subject broadband services to the same pervasive, overlapping, heavy-handed regulatory framework as century-old telephone service (see this and this) -- a framework which a former FCC chairman during the Clinton Administration described as a hopeless "morass."

PK is worried the U.S. Court of Appeals for the D.C. Circuit might rule in a pending case that the FCC doesn't have jurisdiction to regulate broadband. The group also is fretting over a recent observation by AT&T that, "with each passing day, more and more communications service migrate to broadband and IP-based services," leaving the public switched telephone network ("PSTN") and plain old telephone service ("POTS") we all grew up with "as relics of a by-gone era."

Since broadband and IP-based services do not require costly regulation, you might think the overthrow of the PSTN and POTS that more and more consumers view as irrelevant is an opportunity to celebrate a mission accomplished and give legions of federal and state regulators and affiliated lobbyists a well-earned retirement or transfer of their choice. But not PK.

Unless AT&T is also suggesting that the network which replaces the PSTN would also be subject to [the same regulatory framework, i.e., Title II of the Communications Act of 1934], how would any authority to take any action persist?" (emphasis added.)

But as AT&T points out, maintaining two separate communications networks will become increasingly costly and unsustainable.

Every time a household or business cuts its landline, the fixed costs of providing POTS must be spread over a smaller customer base, thus raising the average cost of serving the remaining customers. "[P]erhaps more than any other business in the world, the wireline TelCo is a fixed cost business." According to one estimate, the average per-line cost of maintaining the legacy network has risen from $43 per year in 2003 to $52 per year today. (footnotes omitted.)
AT&T also cites one estimate that of the $28 billion traditional local telephone companies spent in 2008 on capital expenditures, 52.2% went to the legacy network. That makes no sense at a time when the FCC staff estimates a $350 billion investment will be needed to bring 100 mbps broadband service to every household.

No matter what task one tries to accomplish, it helps to have a clearly defined objective. Is faster broadband for all the objective, or continued regulation for the benefit of various reliance interests? Didn't Congress establish a goal of ensuring that all people of the United States have access to broadband capability in Section 6001 of the stimulus bill, aka the American Recovery and Reinvestment Act of 2009? And didn't the President just say he does not believe in bigger government?

According to PK, Title II regulation would "expand the range of opportunities for more aggressive regulatory steps" for widespread deployment of broadband. Sure. Government could subsidize broadband by adding to the deficit or raising taxes or fees.

That would mean expanding or duplicating the current Universal Service program, which would be unwise. Much has been written about the disaster which is Universal Service. The U.S. Government Accountability Office (GAO), for example, noted in June 2008 in a report entitled "FCC Needs to Improve Performance, Management and Strengthen Oversight of the High-Cost Program," that Congress anticipated that competition and new technologies would eliminate the need for Universal Service support mechanisms, but the explicit fund grew nearly 153 percent between 1998 and 2007.

The President has said that it is time to end "tired old battles" and try some common sense. We can start here.

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